Canada’s exports edged down in January, despite a significant surge in energy exports, while imports fell sharply off record highs. The trade data released by Statistics Canada on Tuesday showed that the country recorded a $2.62 billion (US$2.04 billion) surplus in January, beating analyst forecasts of $1.60 billion.
Disappointing Start to the Year
The decline in exports was disappointing, with Stuart Bergman, interim chief economist at Export Development Canada, stating, "It’s not a great start to the year. I think that jumps out right away. It is a bit disappointing." Exports slipped 0.2 per cent, with declines in 7 of 11 product sectors, led by motor vehicles and parts, and declining aircraft exports.
Energy Exports: A Bright Spot
However, energy exports rose 8.7 per cent in January, led by natural gas exports, which were up 66.4 per cent. Crude oil and natural gas prices rose sharply from December and have continued to surge. This should bolster Canada’s trade performance in the coming months.
Looking Ahead
According to BMO Capital Markets analyst Shelly Kaushik, "Looking ahead, we expect red-hot energy prices will continue to buoy exports, with minimal direct impact expected from the sanctions against Russia." Canada is the world’s fourth-largest oil producer and sixth-largest natural gas producer.
Trade Minister Mary Ng’s Visit to India
The visit of Trade Minister Mary Ng to India signals a shift in relations since Trudeau’s ill-fated 2018 trip. This move is expected to boost trade between the two countries, which could have a positive impact on Canada’s exports in the coming months.
GDP Growth and Interest Rate Hikes
The GDP grew faster than expected in the fourth quarter, ensuring that the Bank of Canada interest rate hike will continue. However, Macklem has pledged a careful path forward, stating that "the economy can handle it."
Supply Chain Issues Affecting the Auto Industry
Two-way automotive was another story, with imports of motor vehicles and parts down 13.9 per cent and exports down 9.6 per cent. Statscan stated that supply chain issues continued to affect the Canadian auto industry in January, forcing most auto manufacturers to reduce production.
Imports Fall Sharply Off Record Highs
Overall, imports fell 7.4 per cent, after hitting all-time highs for three consecutive months, with declines in 10 of 11 product sections. December’s trade deficit was revised wider to $1.58 billion from $137 million.
Canadian Dollar and Trade Performance
The Canadian dollar was trading 0.1 per cent lower at 1.2835 to the greenback, or 77.91 U.S. cents.
Share Your Thoughts
- What do you think about Canada’s trade performance in January?
- How will the visit of Trade Minister Mary Ng to India impact Canada’s exports?
- Do you think the Bank of Canada interest rate hike will have a significant impact on the economy?
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